Macro Morning

See the latest Australian dollar analysis here:

Macro Afternoon

Another mixed night on risk markets as Wall Street hits new record highs while European bourses stumbled around with minor losses as the USD reversed course and returned to strength. Commodity currencies took a small tumble as did Euro which returned to its start of week point with 10 year Treasury yields again spiking above the 1.6% level with the first Fed rate hike expectations now factoring in October 2022. Commodity markets all slumped with news that OPEC+ is ramping up supply, with oil futures down nearly 2%, copper and iron ore both off by nearly 4% while gold actually maintained its position just below the $1800USD per ounce level.

Bitcoin made a new historic high after recently breaking through its previous record high (upper solid black horizontal line) but has come back sharply overnight, now trawling below the $63K level. A lot of selling to people buying the top? Short term momentum has inverted and ATR support has been taken out but this is not yet the signs of a wider breakdown:

Looking at share markets in Asia from yesterday’s session, where the Shanghai Composites was selling off quickly going into the close in response to Evergrande concerns again, but managed to get back on track and finished 0.2% higher to 3592 points, while the Hang Seng Index was down more than 1% at one stage before recovering with a minor 0.4% loss to finish at 26017 points.  Price action had been getting ahead of itself after momentum got somewhat overextended so this pullback was warranted. However, it could be the start of hitting a solid level of resistance at the key 26000 points level which equates to the previous September level before this correction so it bears (sic) watching:

Japanese markets are also in retreat mode with the Nikkei 225 closing nearly 2% lower at 28703 points. The daily chart shows a near complete fill of the previous swift corrective phase that took the market down to monthly support at the 27000 point level with trailing ATR resistance overhead at 29300 points still not yet taken out nor daily momentum yet positive:

Australian stocks are largely unchanged with the ASX200 closing above the 7400 point level again, finishing at 7413 points.  SPI futures are also stable despite the small lift on Wall Street, with daily momentum now switching to positive readings and possibly turning this swing trade into something more sustainable, but that 7400 level could prove a little too hard to keep hold off going into the final session of the week:

European markets all pulled back in unison with modest losses that have nearly negated all the week’s gains so far. The German DAX finished 0.3% lower at 15472 points with the daily chart showing this bounce off that key 15000 point level still only a classic swing play that has yet to turn into a re-engagement of the major trend, which requires a proper clearance of overhead trailing ATR resistance at the 15800 point level:

Wall Street continued its bounceback but activity continued to be a little mixed across the three bourses with the DOW not moving while the S&P500 eventually finished 0.3% higher at 4549 points. The four hourly S&P chart was showing a rising bearish wedge pattern but that has been tossed aside for more upside instead, with buyers still evident as we head into the November taper:

Currency markets increased in volatility in response to the reversal in USD which pushed higher against almost everything (except Yuan and gold) overnight. The four hourly chart of Euro shows a double top pattern that failed to get past the mid 1.16 level after being technically overbought but with a lot of short term volatility. The level to watch here is the obvious 1.16 handle which coulud translate into a wider corrective phase back to the previous weekly lows:

The USDJPY pair was also pushed lower, indicating not all is well outside of Wall Street in terms of risk taking with that retracement below the mid 114 level turning into a new weekly low position below the 114 handle proper. While the overall technical picture is still quite bullish, short term momentum readings retraced fully from their overbought settings, which indicated to me this could go down to ATR trailing support. The key level to watch now is the mid 113 zone for signs of a proper follow through:

The Australian dollar was snapped back to reality quickly overnight on the back of lower commodity prices and higher interest rates with a return to the mid 74’s after topping out recently well above the 75 handle. This is classic reversal that is only short term in nature so far, but watch four hourly momentum and ATR support which must hold here going into tonight’s end of week session or it will return to the 74 level promptly:

Brent crude futures pulled back amid the Putin calls for more supply, with a relatively volatile session that saw it finish below the $84USD per barrel level overnight. While strong momentum readings and price action have continued well above the previous medium term downtrend, there is more divergent daily momentum and lower daily lows which are indicating a rounding top pattern is beginning to form:

Gold is holding on despite the stronger USD train with more support building but not yet translating into more strong moves with a small uptick overnight to close at the $1782USD per ounce level. Sentiment remains somewhat muted for gold, with daily momentum just pushing into the positive zone, so while I continue to watch for a possible retracement below the low moving average here on the daily chart, that series of higher lows and price action above could be pushing for a return to the $1800 level instead:

 

 

Glossary of Acronyms and Technical Analysis Terms:

ATR: Average True Range – measures the degree of price volatility averaged over a time period

ATR Support/Resistance: a ratcheting mechanism that follows price below/above a trend, that if breached shows above average volatility

CCI:  Commodity Channel Index: a momentum reading that calculates current price away from the statistical mean or “typical” price to indicate overbought (far above the mean) or oversold (far below the mean)

Low/High Moving Average: rolling mean of prices in this case, the low and high for the day/hour which creates a band around the actual price movement

FOMC: Federal Open Market Committee, monthly meeting of Federal Reserve regarding monetary policy (setting interest rates)

DOE: US Department of Energy 

Uncle Point: or stop loss point, a level at which you’ve clearly been wrong on your position, so cry uncle and get out!

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